Trade-offs and Opportunity Cost Introduction to Economics http://www.youtube.com/watch?v=nCImrmR63JE&feature=related
Choices • Trade-off: Sacrificing one good or service to purchase or produce another • Opportunity cost: value of the next best alternative given up for the alternative that was chosen • What was the opportunity cost of the last purchase you made?
Production Possibilities • The maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time • For a business to produce more of one thing, they have to give up something else
Activity • Create your own production possibilities curve (also called a frontier) for a car company: • Produce cars and SUVs • Cars can be produced using ½ of the resources of an SUV • Show the possibilities of SUV and car production for 0 to 20 cars
Chapter 1, Section 2 Assignment • Section 2 Assessment, page 16 • Numbers 1 – 5 • Due 9/2 at the start of the hour
Chapter 1, Section 2 Quiz • Explain in 2 to 3 sentences, using an example, explain the opportunity cost of something you are going to do today.